Eduardo Briceno employs a powerful tool called volume-weighted average price (VWAP) as his main indicator.
Additionally, he leverages the time and sales feed to discern the ongoing direction of live transactions.
In his meticulous analysis, he carefully records the price points associated with limit orders extracted from the level 2 data table.
In the face of uncertain circumstances and a desperate need for income, Eduardo Briceno made a life-altering decision to escape Venezuela. However, his initial foray into the world of stock trading proved to be a humbling experience. Despite his prior knowledge and limited understanding of the market, he suffered significant losses amounting to $8,000 from his hard-earned savings. Undeterred by adversity, Briceno pressed on, even resorting to loans from friends and family, determined to refine his trading skills.
A pivotal turning point in Briceno’s journey came through a fundamental shift in mindset. Instead of fixating on monetary gains, he redirected his focus to the technical aspects of trading. By detaching himself from emotional impulses and diligently following his trading setups, he began to see marked improvements in his performance.
Examining his account statements, it becomes evident that Briceno’s fortunes started to change in October 2020. With an initial deposit of $28,000 in a Cobra brokerage account, he steadily grew his balance to $40,392.42 by December of the same year. Undeterred by success, Briceno established a new Cobra account under an LLC in January 2021, transferring $40,000. Subsequently, he withdrew an astonishing $437,195.72 throughout 2021 and 2022, even injecting an additional $45,000 into the account in October 2022.
Further diversifying his portfolio, Briceno opened a Guardian account in April 2021, depositing $35,000. To date, he has withdrawn a total of $457,319 from this account. Notably, he bolstered the balance by adding $11,000 and $10,000 in November and December 2021, respectively.
Briceno emphasizes that all subsequent deposits beyond the initial $28,000 were derived solely from his trading profits. By considering his starting capital and factoring in the total withdrawals of $788,551, he achieved a remarkable gain of 2,716.3% from October 2020 through February 2023.
In addition to his trading success, Briceno operates a popular YouTube channel where he shares trading insights predominantly in Spanish. Moreover, he offers online courses, capitalizing on his expertise in the field.
Earning praise from industry experts, Briceno’s exceptional results have been lauded as uncommon and remarkable. Norman Zadeh, a former math professor who oversees the United States Investing Championship, acknowledges the extraordinary nature of Briceno’s accomplishments. However, Zadeh cautions against replicating this approach, highlighting the risks associated with aspiring traders who attempt to follow in Briceno’s footsteps.
Briceno’s triumphant journey can be attributed to a carefully curated repertoire of strategies that amalgamate his training and personal experiences. This comprehensive setup encompasses fundamental analysis, technical indicators, an understanding of trading patterns, and effective risk management. Notably, Briceno specializes in trading small-cap, momentum stocks, leveraging his intimate familiarity with this segment and its distinct movement patterns. Guided by these principles, he relies on three key indicators that serve as invaluable tools in navigating his trades.
Indicators
Eduardo Briceno firmly believes in keeping his trading indicators simple, using them as reference points rather than allowing them to overshadow the theories and variables he considers in his trades. Recognizing that charts provide lagging information without the contextual understanding of price movements, he relies on indicators when he already holds a position. These indicators help him gauge whether price action aligns with his theories and identify the dominant force in the market, whether it’s the sellers or the buyers.
Among the various indicators Briceno watches, the volume-weighted average price (VWAP) holds particular relevance on high-volume trading days. VWAP represents the average trading price of a stock adjusted by trade volume. Briceno interprets the position of the spot price relative to the VWAP line: if the spot price is above VWAP, it signals the buyers’ control, while a drop below VWAP suggests that average traders who bought the stock are now in the red, with sellers taking charge.
When the price of a stock trends in close proximity to and above VWAP, Briceno views it as an opportune entry point for a long position. However, if the price exceeds VWAP by more than approximately 10%, he considers it potentially overextended and tends to sell. His objective is to stay close to the average, avoiding the temptation to chase a stock.
Different types of traders employ VWAP for varying purposes. Contrarian traders and mean-reversion traders, for instance, look for spot prices deviating from VWAP as potential indicators of reversals or corrections.
A recent trade where VWAP played a pivotal role was Briceno’s involvement in a sympathy play. C3.ai (AI) experienced a rally in late March, breaking its resistance line around $30.92. Despite typically avoiding micro float AI stocks like Guardforce AI (GFAI) due to their small float size and limited liquidity, the spike in volume prompted Briceno to overcome his reservations. He managed his risk by taking a very small position size.
On April 3, Briceno initiated a long position on GFAI after it displayed volatility and surpassed its pre-market high of $10.30 shortly after the market opened. Throughout the day, the price remained above VWAP, enabling him to confidently exit and re-enter his position. According to a brokerage account screenshot seen by Insider, he secured gains exceeding $3,800 from these trades.
“The most important thing is that I have the conviction of the trade, not because of the VWAP, it’s because the other criteria feed into what I know that makes it a good long,” Briceno emphasized. In essence, he considers multiple variables unique to each trade. In the aforementioned scenario, he factored in the stock’s float, volume, and the overarching momentum of the AI sector to adjust his risk exposure.
Tape reading is another crucial element of Briceno’s process. Originally derived from the practice of observing telegraph lines transmitting real-time stock data through ticker tape in the 1860s, tape reading has evolved alongside computerized trading. It involves monitoring the time and sales feed, which displays live stock transactions, including crucial information like date, price, volume, trade type, and order speed. Unlike charts, the time and sales feed provides up-to-date data and serves as a vital tool for all traders.
